Sub 7 (a) now highlights the concept that the issuing bank honors & it does not negotiate, the act of negotiation is restricted to the nominated bank or the confirming bank.
Does this mean that a credit available by negotiation & payable 90 days after B/L date would only be honored on maturity by the issuing bank if the nominated bank with whom the credit was available does not negotiate?
Regards
Khalid
Article 7(a) v.
Article 7(a) v.
Khalid,
Notwithstanding the definition of honour in Article 2, and the critisms made of it by Boris Kozolchyk in the latest DCI, I would regard an issuing bank that discounted -at the presenter’s request- its DPU or a draft accepted by it as having honoured. Thus, I consider that honour can take place prior to the due date of the issuing bank’s obligation.
Regards, Jeremy
Notwithstanding the definition of honour in Article 2, and the critisms made of it by Boris Kozolchyk in the latest DCI, I would regard an issuing bank that discounted -at the presenter’s request- its DPU or a draft accepted by it as having honoured. Thus, I consider that honour can take place prior to the due date of the issuing bank’s obligation.
Regards, Jeremy
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AbdulkaderBazara
- Posts: 256
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Article 7(a) v.
Agree, similarly negotiation of a draft by a nominated bank or a confirming bank can take place on the maturity date of the draft. This stems from the definition of negotiation which states "agreeing to negotiate ON or before the banking day on which reimbursement is due to the nominated bank."
Article 7(a) v.
Jeremy/Abdul Kader,
Thank you, for you thoughts. I have no disagreement with you that issuing bank may honor before the maturity under a separate agreement with the beneficiary. However, I believe that in terms of article 7(a) (v) there is no obligation on the issuing bank to honor before maturity.
Regards,
Khalid
Thank you, for you thoughts. I have no disagreement with you that issuing bank may honor before the maturity under a separate agreement with the beneficiary. However, I believe that in terms of article 7(a) (v) there is no obligation on the issuing bank to honor before maturity.
Regards,
Khalid
Article 7(a) v.
Khalid, perhaps I’m taking your last sentence the wrong way, in which case sorry, but I was not suggesting there is any obligation for an issuing bank to honour before the due date and I cannot imagine that anyone would suggest otherwise.
Regards, Jeremy
Regards, Jeremy
Article 7(a) v.
Jeremy,
Have I missed something?
I read in article 2: "incur... accept... AND pay at maturity" and now, according to you, (correct me if I am wrong), "honour" can take place before maturity? If an issuing bank
discounts a DPU or acceptance, is it "honour" or something different?
Daniel
Have I missed something?
I read in article 2: "incur... accept... AND pay at maturity" and now, according to you, (correct me if I am wrong), "honour" can take place before maturity? If an issuing bank
discounts a DPU or acceptance, is it "honour" or something different?
Daniel
Article 7(a) v.
Daniel,
You’ve not missed something; it’s the Drafting Group -and possibly the ‘Banking’ Commission- that has missed something!
If ‘prepaying’ or ‘purchasing’ a draft / DPU -expressly recognised by Article 12, even though the authority is confined to a nominated bank- is not ‘honouring’, what is it? Furthermore, I would argue that where a presenter requests the prepayment / purchase of a draft / DPU by a nominated / issuing bank they are agreeing to a modification of the Article 2 definition -something they are perfectly entitled to do- and agreeing that ‘honour’ may take place before maturity.
Regards, Jeremy
[edited 2/20/2007 3:30:08 PM]
[edited 2/20/2007 4:08:43 PM]
You’ve not missed something; it’s the Drafting Group -and possibly the ‘Banking’ Commission- that has missed something!
If ‘prepaying’ or ‘purchasing’ a draft / DPU -expressly recognised by Article 12, even though the authority is confined to a nominated bank- is not ‘honouring’, what is it? Furthermore, I would argue that where a presenter requests the prepayment / purchase of a draft / DPU by a nominated / issuing bank they are agreeing to a modification of the Article 2 definition -something they are perfectly entitled to do- and agreeing that ‘honour’ may take place before maturity.
Regards, Jeremy
[edited 2/20/2007 3:30:08 PM]
[edited 2/20/2007 4:08:43 PM]
Article 7(a) v.
I refer to the example of Khalid, so the credit is available by negotiation & payable 90 days after B/L date. If the nominated bank does not negotiate, the issuing bank will have to honour. Does it mean that IB will have to pay at maturity or issue a DPU (as "honour" cover both)? 7 (a)v is not specific to the kind of honour.
Daniel
Daniel
Article 7(a) v.
Daniel,
I do not see the position is, in practice, any different under a credit subject to UCP600 than to one subject to UCP500.
In the case of Khalid’s example, irrespective of whether or not the bank nominated to negotiate negotiates, the issuing bank will have to ‘honour’ under UCP600 (contrary to what 7(a)(v) seems to suggest, i.e. it seems to suggest that honour by the issuing bank only takes place if negotiation does not; this is clearly not the case) as -assuming the documents are compliant- if the credit:
1. requires a draft, the issuing bank must automatically accept it and pay it at maturity whether or not negotation has taken place.
2. does not require a draft, the issuing bank auotmatically incurs a deferred payment undertaking and has to pay it at maturity whether or not negotation has taken place.
Thus, the position is unchanged from UCP500.
Regards, Jeremy
I do not see the position is, in practice, any different under a credit subject to UCP600 than to one subject to UCP500.
In the case of Khalid’s example, irrespective of whether or not the bank nominated to negotiate negotiates, the issuing bank will have to ‘honour’ under UCP600 (contrary to what 7(a)(v) seems to suggest, i.e. it seems to suggest that honour by the issuing bank only takes place if negotiation does not; this is clearly not the case) as -assuming the documents are compliant- if the credit:
1. requires a draft, the issuing bank must automatically accept it and pay it at maturity whether or not negotation has taken place.
2. does not require a draft, the issuing bank auotmatically incurs a deferred payment undertaking and has to pay it at maturity whether or not negotation has taken place.
Thus, the position is unchanged from UCP500.
Regards, Jeremy
Article 7(a) v.
Jeremy,
I agree about you conclusions, I also agree about acceptance. But I wonder (not disagree but wonder) about deferred payment.
There isn't such a thing as incurring a DPU in 500. So if a presenter requests IB/CB to confirm that it will pay at maturity, IB/CB does not have to (maybe for fear of issuing an additional undertaking; on n'est jamais trop prudent). With 600 a DPU will have to be incurred.
Do you happen to know why almost all BA flights from Birmingham are cancelled.
Daniel
I agree about you conclusions, I also agree about acceptance. But I wonder (not disagree but wonder) about deferred payment.
There isn't such a thing as incurring a DPU in 500. So if a presenter requests IB/CB to confirm that it will pay at maturity, IB/CB does not have to (maybe for fear of issuing an additional undertaking; on n'est jamais trop prudent). With 600 a DPU will have to be incurred.
Do you happen to know why almost all BA flights from Birmingham are cancelled.
Daniel